hands, giving a sense of touch. it gives our brain what we can touch. they can feel things like cotton and wood. i'm del walters in new york. "inside story" is next. >> higher prices, cracking down to sales, tougher and tougher messages, all have helped to reduce smoking, and now another national retailer has another idea. how about making smokes hard to buy at all? that's the "inside story."

hello, i'm ray suarez. it has been half a century since the steady drumbeat that has gotten louder and louder in years past. smoking makes you sick, it shortens your life, it adds billions every year to america's medical bills. cvs, a huge player in the healthcare retail category has stolen a day's march on its giant competitors. names like wal-mart, walgreen's, and made a surprising announcement, the chain's stores will no longer sell you medicines to make you well in the back of the store and products to make you sick over the front counter. selling cigarettes is profitable, selling cigarettes is legal, and they contribute mightily to taxes in the united states. it's an interesting corporate call. let's take a closer look. >> it's the right time, and the

right decision to remove cigarettes and tobacco products from our store shelves. positionition uing us for a grog role in the country's healthcare system. >> the drugstore chain will exchanges out cigarettes and other tobacco products in the coming months. by october this year, you won't see camel or marlborough or winston on the shelves of the stars. it could cost as much as $2 billion if revenue. a dent in the $125 billion in cvs sales in 2012. the obama administration applauded the administration, and the former smoker said it sets a powerful example hall ultimately help to bring down healthcare costs. kathleen sebelius celebrated the decision, saying that cvs has taken an unprecedented step in

the retail industry. this announcement comes days after the food and drug administration announced an ad campaign aimed at smoking prevention for teens. >> don't let tobacco control you. >> starting next week, the $115 million multimedia campaign will be seen on tv in print stots and magazines like teen voc and social media. it's estimated that 90% of smokers pick up the habit before they turn 1. and the real cost campaign is aimed at kids between 12 and 17 who are not yet hooked but may be tempted. more than half a million people die each year because of smoking related illnesses. just last week, the fourth marlborough man passed away, his life taken by the lethal product

he helped promote. smoking rates have fallen dramatically since the days of the marlborough man. nearly half of adults smoked in 1965, while today only 18% puff away. despite the encouraging numbers, 42 million americans can't kick the habit. their addiction makes smoking the leading cause of preventable death with $42 million in direct medical costs. other stores are trying to prevent trying to move beyond the role of traditional pharmacies and becoming healthcare providers. cvs has clinics with nurses and doctors on staff, administering flu shots. the company's president said that is hing a product that leads to health issues is extremely inconsistent. >> every day we're helping

millions of patients manage conditions like high blood pressure and high cholesterol and diabetes, and all of these conditions are made worse by smoking. tobacco products have noplace in a setting where healthcare is delivered. >> reporter: cvs is not the first retailer to stop selling cigarettes. target did it 20 years ago. there are laws in some cities that prohibit sales in pharmacies. you can't smoke in office buildings or bars or restaurants. and it's the latest in the growing trend to stop smoking, because as the surgeon general concluded in 1964, smoke being kills. >> organizations like the american cancer society have long been fighting for a ban of tobacco products in drugstores, and joining me from atlanta,

dr. wender, of the american cancer society. just a sign of the times or is something more substantial going on here? > >> i believe its both. i believe this is a unique time in hest. the whole business model for the retail industry is changing, but healthcare has truly risen to the top of our national agenda. not just for the health of the nation, but for the economic future of the nation. so it is a sign of the times. but it is also a company just stepping up and realizing that it's time to do the right thing. >> do you anticipate that cvs will be a trendsetter in this regard? that other companies working in that space will follow suit or will they watch and see how it goes for a while? >> it's a great question and a critical one. all of the retail pharmacies themselves have posed this question. cvs is not the first company,

who i'm sure has raised the issue of providing healthcare on one hand and selling tobacco on the other. i personally believe that the other companies will be watching very carefully. and i also think they're going to feel quite a bit of pressure as a result of the cvs decision, and the very positive response to taking action than they would have. >> but if you're going to carry on smoke being, you'll just get your cigarettes some other way, won't but. >> there's no question that pharmacies are not the main way that people buy cigarettes today. convenience stores themselves are responsible for selling 80% of all of the cigarettes. only 15% of all tobacco sales occur in retail pharmacies. but nevertheless, i'm very confident that at least some people will quit as a result of the decision. they're going to walk into cvs

where they have always bought their cigarettes, and they're going to be forced to make a personal decision, do i go somewhere else or is this the year that i quit? we know from years of fighting the tobacco problem, if you make it more difficult to smoke, some people quit. every time you make a building smoke-free, some people equity. and we have eliminated one important place to buy cigarettes, and some people will quit. >> if it's corporate announcement, cvs said that the mission is no longer consistent. are we satisfied that since the surgeon general's report, that we're taking baby steps to putting a societal cost and dollar amount to the idea of continuing to allow a lethal product to continue to be sold? >> i believe we are, and that's why i said at the beginning,

this moment has changed. compared to target's decision 20 years ago, because the problem of healthcare costs, it is impacting our entire economy. i'm glad you mentioned the surgeon general's report that we're celebrating the 50th anniversary of right now. and i call it the most impactful report in history. and i believe that 50 years later, it's going to to do it again and still be a living and powerful document. i'm sure that it's not a complete coincidence that cvs made the decision now, as pash of the 50th anniversary to make this the moment that they made the ski decision to no longer sell tobacco products. but there's no question that all of us, who are in the healthcare business, have a responsibility to look at better health and better healthcare experience,

but a more efficient healthcare system. and part of that responsibility will be to do the right things to prevent chronic illness, and acute illness, tobacco does both. >> dr. wender, thank you for joining us. when we come back, after a quick break, we will continue our conversation about cvs's decision on tobacco and try to understand the public health and branding business decision that's go into stopping a product.

>> welcome back to "inside story." i'm ray suarez. cvs just announced it will phase out the sale of tobacco products. it will cost the company

$1.2 billion in annual revenue, but what does the decision mean in the fight against smoke something the nation's health? dr. steven schroeder in san francisco joins us in washington. he's the director of the smoking cessation leadership center. from chicago, morning star equity research, where he focuses on the healthcare services industry. and the president and ceo of the robert wood johnson foundation, joins us here in washington. dr. schroeder, is this a symbolic move or one that results in the end of the process with fewer people smoking cigarettes and. >> it's clearly an important symbol. but my hope as said by dr. winder, is that it will cause some people who thought about quitting to quit now, and the fact that you're not going to see as many advertisements in the cvs stores, may stop young

people from starting smoking. >> you've done actual research on this and written a paper on it. and what did you find? was there an effect from geographical proximity to whether or not you pick up a pack of buds or not? >> . >> we found in 1976, was that pharmacists really chafe from selling healthcare products and selling cigarettes. we found that independent stores mainly did not, and the chain pharmacies d since that time, the independence started vanishing, and almost all pharmacies are run by chains, and this is critical. research shows that the denser the concentration of places selling cigarettes, the more likely people are to be smokers. >> we have heard a couple of times about that conflict of missions between a company that

wants to physician itself as a healthcare provider while selling these other products. but around the country, local laws vary, but other places like cvss and others in particular, sell booze, beer, and premium ice cream with high butter fat and a lot of things that aren't good for you. is it because smoking is so much in society's cross-hairs now that that conflict comes into sharper focus? >> i think it comes into sharp focus, ray, because cigarettes and tobacco products are universally harmful. you can't make an argument to continuing to smoke. it causes illnesses and grave death. there's no gray area there. you can make an argument for most of the other products that you mentioned. so having a healthcare company,

where healthcare services are delivered and also selling a product that's universally harmful is a conflict of interest that you can't ignore >> so while you're checking out your lipitor, if you have a quart of ben and jerry's! >> not a quart, but you can have some. >> oh, boy, let's talk about this as a business decision. the company acknowledged from the very beginning, that it's going to trim $1 billion from its revenue. it's north of a $100 billion concern. and how much of a big deal is this as a business decision? >> not necessarily a lot. when you look at what they're bringing? in terms of revenue and profitability, cvs is a healthcare servicer, meaning thaingthat the health plans, mag the healthcare costs, that's a

key part of their business, so it makes sense to take the products out of the retail side and it's a hit to the bottom line. so what they can do is sell products on the other side of the health, to employers and health plans, to control the healthcare costs, and controlling the drug pricing costs overall. because we know that healthcare costs are going up, and premiums are going up, and the expenses in terms of health insurance will go up annually. and cvs is trying to help them control the costs, and it makes sense to take the tobacco products out right now. >> arguably, places like cvs stops selling cigarettes, they can close some of that $2 billion gap? >> they say they will for 2014 and beyond. and they say they can exceed their projects and play it out for december with long-term

growth and profitability. so again, the main business is helping with the health insurance plans, and payers manage their medical costs. this is a key piece of that strategy in terms of being able to sell and all encompassing healthcare services. they're getting a lot of good pr out of this. and they're going to be looked upon as being one of the better players in the pharmacy chain. but overall, this makes a lot of strategic sense when you look at the total operation and both sides of the business, and what they can get from a growth perspective. and bottom line perspective. >> when you look at the sector, is there a way to price in the value of pr when a company makes a decision to trim $2 billion off of its revenue? can you price in less tangible corporate moves? >> not necessarily. what you do is discount cash flows, and that's the end of the

story for stock evaluation. so when you look out beyond 5, 10 years, when you look at cvs and their cash flows, they're tied heavily to the management business, or the business that helps healthcare plans control their costs, so it makes sense from a long-term perspective that it would happen today. it's nice to see it happening, and nice to see them from a pr perspective today. but in the longer term, this helps a great deal for growing their business, because they can go ahead and tell plant sponsors and employers, and the government for that matter that the services they sell in terms of costs, and controlling drug benefit costs is there. and it's not going to harm their members when they come into the stores. >> not just controlling costs, doctor, but having as part of the profit picture, bringing downstream medical costs.

with cvs. >> absolutely, and that's the trend that we're seeing, not only in the healthcare community. but in the healthcare community. that part of keeping people healthy is embracing the culture of health. and giving people the opportunity to make those healthy choices as a default. and what cvs is doing, as dr. schroeder said, decreasing the sensety of opportunities to buy a harm of product, and increasing their opportunity to make healthy choices, so in the long run, they're increasing their opportunity to keep people healthy, which will help their business model. >> dr. schroeder, i know its hard to predict a business model on-the-fly, but what about doing nothing? adults, one in five now, and

customers dying out the back end, is the this a product whose best days are behind them anyway? >> that's because we live in gated communities. most people i know don't know smokers. smokers are concentrated with poor people, mental illness and the homeless, and so we don't see them. but the stark facts are really sobering. almost 500,000 people a year die from smoke being. there are 43 million smokers, and as doing nothing means killing people. >> we're going to take a short break, and when we come back, the future of the tobacco industry and the healthcare industry. this is "inside story."

>> welcome back to "inside story," i'm ray suarez. 50 years ago, half of the adults in the country smoked and now it's 18%. that's progress, but smoking

still kills half a million people in this country a year. on this edition, we're talking about the ongoing battle against smoking, especially in light of cvs, saying that it will stop the sale of all tobacco products in its stores later this year. and raj, how is the business world positioning itself for handling a product that public sentiment continues to sour on, but has a pool of customers who will continue to need it, at least for the foreseeable future? it's tough to strategize around a product that in many ways is as unpopular as cigarettes. >> well, it depends who you are. if you're a retailer, it's a head wind. but there's abeffort it cut back on smoking, and ensure that the pool of folks that you're servicing are healthier. so when you look at the underwriting that's going into

health insurance plans, smoking is a key piece of that. so they're pricing out risks based on smoking. and there are firms out there, such as cvs that are helping these plans try to control these costs, and trying to control the use of medical care and services, and that's going to be a key piece of growth for the top and cvs. when you look at the true value for cvs and a true value driver, i believe that the pharmacy business is a key piece of that. it's retail business is nice to have, it's a good add on, but really, the pharmacy benefit management is a key driver, and this strategy goes hand-in-hand with driving value for the firm and that segment. >> doctor, we have been talking about the tumult in the cigarette business, and there's

plenty of tumult in the business, and what's the thinking on getting the remaining smokers to cut back or stop? >> the factors that influence whether people cut back or stop are really three, price, that's a big factor in whether or not a per is willing to start in the first place, especially young people, but also, whether they're willing to quit. the availability or ease of being able to smoke, and that speaks to whether you can smoke in a business place or right outside of it, and then how well people understand the consequences of smoking. and so those three factors are critical in making sure that people first of all don't start. and then are motivated to quit. now, once you have the motivation, of course you need to have smoking cessation products and supports to ensure or help people be successful. >> dr. schroeder, you mentioned

earlier that it's a certain subsection of american society that is still hanging onto the habit of cigarette smoking. i worked as a convenience store clerk as a college tune. and i was selling cigarettes for 75 and 85 cents a pack, and i've seen signs offering cigarettes at $85 a carton, and you mentioned how smokers tend to be poorer, and it's a tremendous burden, but it shows even with that price differential, people can't stop. >> this is a taboo, and things like, poor uncle joe has chronic mental illness, and smoking is his only pleasure, why help him stop and then, he's going to die 20 years earlier, and the death might be miserable. and b, he's going to expose

little jimmy to secondhand smoke. so now we're trying to get others to say let's get help. the 12 tep programs could be offering help to its members who would like to quit and haven't done it yet. but we can do that. in terms of costs, a lot of the people we see panhandling may not be panhandling for foods or clothes or alcohol or drugs, but for cigarettes because they want them so badly, and they don't have the money to buy them. >> still in all, does this represent this move by cvs today? as someone who watches this, and someone who distributes information about this to the country, was this a celebratory moment for you? >> absolutely. this is a huge precedent for a major company like this to say, it's willing to take a hit, a financial hit, maybe only short-term we hope, but a courageous move to set a new

precedent that business can do the right thing and help to contribute to a culture where we all look to be healthier. so this was a very celebratory day for those of us who are looking to reduce the deaths from tobacco and the chronic illnesses that come from tobacco. >> so another step toward denorming smoking cigarettes? >> i think we have to take this step, and this was a big step toward denorming tobacco use. >> doctors, thank you for being with me today. and that brings us to the end of this edition of "inside story." in washington, i'm ray suarez.

welcome to al jazeera america. i'm del walters. these are the stories we are following for you. sochi security, the u.s. warning of knew threat. mauerless, hundreds of thousands of people waiting for their lights toment come back on. >> and a controversial trial beginning in florida a white man accused in the shooting death of a black teenager. the case now in court. ♪